PAUL BUCKOWSKI/TIMES UNION
CHIEF JUDGE Jonathan Lippman tells a legislative panel Thursday in Albany that more needs to be done to help indigent people.
(PAUL BUCKOWSKI)

PAUL BUCKOWSKI/TIMES UNION
CHIEF JUDGE Jonathan Lippman tells a...

Chief Judge, New York State Court of Appeals, Jonathan Lippman, talks with members of the media after testifying in front of senators and members of the Assembly during an Albany IOLA joint legislative hearing in Albany, NY on Thursday, Jan. 7, 2010. (Paul Buckowski / Times Union)

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ALBANY -- New York's top judge wants to tap into the state budget to help overhaul the way legal services are funded for the poor in civil cases.

Chief Judge Jonathan Lippman told a joint legislative panel Thursday the special fund the state has used for more than 25 years for civil legal services covers only the "tip of the iceberg," leaving large numbers of needy litigants without legal representation as they fight for basic necessities such as food, shelter and health services.

Even when the state had a strong economy, the judge said, only 20 percent or so of those eligible for help were being served.

For the first time ever, $15 million to offset the shortfall has been allocated by the state's Unified Court System, but more money is needed, he said.

Lippman suggested funding should come from the state's general fund.

"Clearly, our state is failing to provide low-income New Yorkers with meaningful access to justice," Lippman told lawmakers during a state hearing at the Empire State Plaza on the future of civil legal services in the state. "We cannot and will not stand idly by as legal services programs are forced to shut their doors, leaving our most vulnerable citizens without help in their time of greatest need."

Lippman said he hoped for an umbrella system that included a mix of the present system and state budget dollars.

"To ultimately succeed," he told the panel, we must have permanent state funding that is not dependent on any single revenue steam."

Since 1984, the state has funded the civil legal services of the poor entirely through the state Interest on Lawyer Account fund. The IOLA system requires lawyers to pool short-term and small accounts to generate money. The interest, in turn, finances the fund.

Lippman told lawmakers the economic downturn caused IOLA revenues to drop from $31 million to less than $8 million for all of this year.

Christopher O'Malley, the executive director of the IOLA fund, testified as of October the 11 largest financial groups holding IOLA accounts were providing an average interest rate of .31 percent -- a drop from more than 1 percent in 2008 and nearly 2.25 percent in 2007.

Explaining the importance of the fund, O'Malley said in 2008 alone it distributed some $24 million to more than 500,000 clients in need of direct legal aid. And more than a million more individuals received other forms of assistance, he said, adding that 16,600 low-income families with more than 41,700 household members avoided eviction or foreclosure because of legal aid.

O'Malley said one potential avenue for money would be public or private sector funds not being used to generate interest for any benefit. He said several other states have funds such as IOLA that include reserves during periods of higher revenue.

Among the groups offering testimony on the issue was the New York State Defenders Association. Director director. Jonathan Gradess, proposed $40 million from the state budget be allocated for civil legal services.

A spokeswoman for Gov. David Paterson's Division of Budget said the 2010-11 budget was still in the developmental process and declined further comment.